SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 For the fiscal year ended
December 31, 1996 Commission File No. 0-10089
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 For the transition period
from to .
UNIOIL
(Name of small business Issuer in its charter)
Nevada 93-0782780
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
3817 Carson Avenue, P.O. Box 310 Evans, Colorado 80620
(Address of principal executive offices)
Issuer's telephone number, including area code: (970) 330-6300
Securities registered pursuant to Section 12(b) of the Act:
None.
Securities registered pursuant to section 12(g) of the Act:
Common Stock $.01 Par Value) 9,441,657
Title of Class Shares outstanding as of March 31, 1997
Check whether the Issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the Issuer was required to file such reports) and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
Check if no disclosure of delinquent filers in response to Item
405 of Regulation S-B is contained in this form, and no
disclosure will be contained, to the best of the Issuer's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
The Issuer's revenues for its most recent fiscal year: $ 873,868
The aggregate market value of the voting stock held by
non-affiliates of the registrant is not determinable because of
the lack of market quotations. (See Item 5 herein).
Check whether the registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court. Yes X No
None of the following documents is incorporated by reference into
this report: (1) Any annual report to security holders; (2) Any
proxy or information statement; (3) Any prospectus filed pursuant
to Rule 424(b) or (c) under the Securities Act of 1933.
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PART I
Item 1. Description of Business
(a) Business Development.
Unioil (the "Issuer" or "Company") was incorporated under
the laws of the State of Nevada on January 16, 1981. The Issuer
was organized to engage in the acquisition of undeveloped oil and
gas leases for purposes of resale, farmout or trading, and to
participate with others in the development of drilling prospects.
The Issuer made an initial public offering of its common stock
during 1981. This offering was made pursuant to a registration
statement under the Securities Act of 1933 filed with the
Securities and Exchange Commission in Washington, D.C.
On August 17, 1984, the Issuer filed a Voluntary Petition
for Reorganization pursuant to Chapter 11 of the United States
Bankruptcy Code with the United States Bankruptcy Court for the
District of Colorado (the "Bankruptcy Court"). The Issuer
continued in the reorganization process until March 23, 1989 when
the Bankruptcy Court issued a Final Decree discharging the
Issuer. Even though the Issuer's Plan of Reorganization had been
approved and confirmed by the Bankruptcy Court in 1985, the
Issuer was not discharged from bankruptcy until 1989 due to
continuing legal proceedings involving the Issuer over which the
Bankruptcy Court needed to retain jurisdiction pending resolution
(see "Legal Proceedings").
The Plan of Reorganization approved by the Bankruptcy Court
had been funded by a secured loan from Joseph Associates, Inc.
("JAI"). All of the Issuer's assets, including its cash and
accounts receivable, were pledged to JAI to secure the
indebtedness owed to it. Because of the Issuer's inability to
repay this indebtedness on schedule, during 1990 JAI, as the
mortgagee under the Mortgage, Security Agreement, Assignment and
financing statements securing these loans, notified the first
purchasers of oil and gas produced from properties in which the
Issuer had an interest to direct all payments of proceeds
attributable to the Issuer's interests directly to JAI because
the Issuer had failed to make payments on the loan as required.
JAI subsequently assigned its position as a secured party
with respect to the Issuer's loan to Joseph Associates of
Greeley, Inc. ("JAGI"), an entity controlled by the persons to
whom JAI was indebted. JAGI is now the direct recipient of all
production payments attributable to the Issuer's interests in oil
and gas properties.
(b) Business of Issuer.
Beginning in January, 1982, the Issuer engaged in various
aspects of the oil and gas business primarily involving the
acquisition of interests in oil and gas leases and arrangements
to provide for or participate in the development and operation of
such interests. Prior to its bankruptcy, the Company
participated with other firms and investors in the drilling of
numerous oil and gas wells. The Company sometimes acted as the
operator of the wells in which it participated but all drilling
and related work was done through separate contractors.
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The Company's current holdings are located in Colorado and
Wyoming. Soon after filing for bankruptcy protection in August,
1984, all acquisition and drilling activity of the Issuer ceased.
The Issuer participated in the drilling of only one well in 1985,
and has not participated in the drilling of any wells since that
time. During the pendency of the bankruptcy and since its
discharge, the Issuer's business activity has been limited to
continued operation of existing wells drilled on properties it
acquired. In some instances, the Company has re-worked existing
wells to increase production.
However, during 1996 the Company did enter into two
agreements to resume drilling activity in 1997 with respect to
the leasehold interests of the Company and provide financing for
such drilling. In November, 1996 the Company and JAGI entered
into an agreement with Prima Oil & Gas Company ("Prima") pursuant
to which the Company contributed 26 potential drillsites and
Prima contributed another 26 potential drillsites into a
drillsite pool. Prima will act as operator and finance the
drilling of the wells, for which it will be entitled to 100% of
the working interest until payout, after which the working
interest will be divided 72.5% to Prima and 27.5% to the Company
and JAGI. In addition, 8 potential recompletion well sites were
contributed to this pool, on which Prima will also act as
operator, and at its discretion and sole cost, recomplete in
return for a 72.5% working interest after recompletion. Upon
recompletion, the Company will immediately be entitled to its
working interest share (27.5%) of all production payments,
without waiting for payout. In December, 1996, the Company
entered into an agreement with PanEnergy Financial Services, Inc.
("PanEnergy") to provide financing for the drilling and
completion costs of wells. Under this agreement, PanEnergy will
provide financing on a reimbursement basis for up to 95% of the
Company's working interest costs of drilling and completing 8
wells which the Company, as operator, considers capable of
producing oil and/or gas in commercial quantities. PanEnergy
will be entitled to repayment of the amounts advanced plus
interest at 1% over prime, through a 95% allocation of the
production payments attributable to the Company's interest in
these wells.
As an operator of and interest holder in a number of
producing oil and gas wells, the Issuer's products consist of
unrefined petroleum products such as crude oil, natural gas and
condensates therefrom. The Issuer is a relatively small producer
and its position in the industry is insignificant. The oil and
gas industry is very competitive and is dominated by a number of
large producers, refiners and retailers. Such companies have
substantially greater resources and expertise and significant
competitive advantages over the Issuer. The Issuer's ability to
market its products, and the prices at which it can market them,
are subject to numerous factors and conditions existing in the
industry over which the Issuer has no control. Crude oil prices
are determined on worldwide markets and are constantly
fluctuating based on a number of political and economic factors.
The Issuer can only sell its oil to large refineries, oil
companies and other users at whatever the prevailing price in
such markets is at the time. Also, natural gas is generally sold
to a gas processing company that has pipelines and other
distribution facilities sufficiently nearby to connect to the
wells. If no such facilities exist, a well may be shut-in even
though capable of production. However, none of the gas producing
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wells in which the Issuer has an interest is presently shut-in.
Presently the Issuer does have gas and oil contracts in place for
all the output from the wells in which the Issuer has an
interest.
Item 2. Properties
(a) The Company's principal business offices are located at
3817 Carson Avenue, P.O. Box 310, Evans, Colorado 80620. The
Company currently leases these offices on a year to year basis,
with monthly payments of $1,000. The building contains about
6,300 square feet of improved space of which about 2,500 square
feet is presently utilized by the Company for its offices. The
Company's other property and equipment (other than oil and gas
properties) is comprised principally of equipment used in the
field in connection with oil and gas exploration and production
activities.
Reserves and Other Information
Information regarding oil and gas reserves and the present
value of estimated future net revenues is set forth as
supplemental information in the financial statements attached
hereto.
Quantities of estimated net reserves of crude oil and
natural gas for the Company's properties and for its interest in
those properties as of January 1, 1997, are presented in summary
form below:
Crude Oil Natural Gas
Proved Developed/Prod. Reserves 104,078 89,761
Proved Developed/Nonprod. Reserves 42,970 433,291
Proved Undeveloped Reserves 1,689,222 25,962,622
Total Reserves 1,836,270 26,485,674
Proved undeveloped reserves will only be recognized through
substantial drilling in future years. No assurance is given that
any such development will take place.
Natural gas volumes are expressed at standard conditions of
temperature and pressure applicable in the area where the
reserves are located. Condensate reserves estimated are those
obtained from normal separator recovery. Crude oil and natural
gas liquids are stated as standard barrels of 42 U.S. gallons per
barrel.
Value of net proved reserves is expressed in terms of
estimated future net revenue and present value of future net
revenue. Future net revenue is calculated by deducting estimated
operating expenses, future development costs, and severance, ad
valorem, and windfall profit taxes from the future gross revenue.
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Present value of future net revenue is calculated by discounting
the future net revenue at the arbitrary rate of 10 percent per
year compounded monthly over the expected period of realization.
Present value, as expressed herein, should not be construed as
fair market value since no consideration has been given to many
factors which influence the prices at which petroleum properties
are traded, such as taxes on operating profits, allowance for
return on the investment, and normal risks incident to the oil
business.
Prices for crude oil, natural gas liquids, and natural gas
effective in December, 1996 reflect the posted prices in the
Rocky Mountain Region on December 31, 1996. Current average
operating costs are used in estimating future costs required to
operate the properties. Estimated future net revenue and net
present value of the Company's revenues from estimated production
of proved reserves, are as follows:
10% Disc.
Future Net Future net
Revenue Revenue
Proved Developed/Prod. Reserves $ 1,724,143 $ 1,124,054
Proved Developed/Nonprod. Reserves 1,136,864 703,974
Proved Undeveloped Reserves 56,152,268 24,167,954
Total Reserves $59,013,275 $25,995,982
Reserves Reported to Other Agencies
The Issuer has filed its reserve report with the Department
of Energy for their annual oil and gas survey and has not filed
or reported reserve information to any other federal authority or
agency since the beginning of the last fiscal year.
Drilling Activity
The Company has not participated in any drilling activity
since 1985. However, the Company has entered into two agreements
to resume drilling activity in 1997 with respect to the leasehold
interests of the Company.
Productive Wells and Acreage
The total gross and net wells, expressed separately for oil
and gas, and the total gross and net developed acres as of
January 1, 1997 are as follows:
Geographic Area Productive Wells Developed Acres
Gross Net Gross Net
Oil Gas Oil Gas Oil Gas Oil Gas
Colorado
Wyoming 42 0 31.0 0 1,680 0 1,210 0
6 0 3.0 0 240 0 121 0
Wells that produce both oil and gas are treated as oil wells
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herein. Of the 42 gross wells in Colorado, 34 are producing oil
and gas and eight are oil wells only.
Undeveloped Acreage
At December 31, 1996, the Company held interests in 8,870
gross (7,469.5 net) undeveloped acres in the United States, as
summarized below:
Geographic Area Gross Acres Net Acres
Colorado 8,030 6,786
Wyoming 840 683.5
All the acreage shown is held by production from the
Issuer's presently producing wells.
Production
The following table sets forth, by geographic area, for the
fiscal years 1996, 1995, and 1994: 1) the Issuer's portion of the
net quantities of oil in barrels, and gas in thousand cubic feet
(MCF), produced from properties in which the Issuer had an
interest; 2) the average sales price per barrel of oil and MCF of
gas shown separately; and 3 ) the average lifting cost per unit
of production of oil and gas shown together on an equivalent
basis. The unit of production for purposes of averaging costs is
barrels. MCF of gas is converted to barrels at the rate of 6 to 1.
1996 1995 1994
Oil Gas Oil Gas Oil Gas
1) Net
Quanities
Wyoming 10,162 1,713 6,991 0 9,789 0
Colorado 8,325 44,003 9,358 35,527 12,133 55,071
2) Average
Sales Price:
Wyoming $20.27 $3.74 $15.05 $ 0 $11.97 $ 0
Colorado $20.28 $1.76 $16.73 $1.35 $14.81 $1.62
3) Average 1996 1995 1994
Lifting Cost: Barrels Barrels Barrels
Wyoming $10.90 $12.49 $ 6.89
Colorado $22.94 $24.00 $16.35
Present Activities
The Company has no wells in the process of being drilled.
(b) Investment Policies.
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The Issuer does not have any policy with respect to
investments in real estate or interests in real estate, real
estate mortgages, securities of or interests in persons primarily
engaged in real estate activities, except for its investments in
oil and gas producing properties and undeveloped acreage which is
a necessary incident to its oil and gas producing business. With
respect to such properties, the Issuer's general policy is to
hold the properties for present production as well as possible
future exploration, development and production.
(c) Description of Real Estate Operating Data.
The Issuer's real property interests consist of oil and gas
leasehold interests in a number of producing oil and gas wells
and adjacent acreage. Detailed operating data regarding such
properties, which account for all of the Issuer's operations, is
contained in the preceding section of this report as well as in
the financial statements and the supplemental information
regarding oil and gas producing activities included with such
statements.
Item 3. Legal Proceedings.
The following discussion outlines the current status of the
legal proceedings involving the Issuer which are still pending or
were pending at any time during the fiscal year covered by this
report.
1. On September 28, 1988 the United States Securities and
Exchange Commission ("SEC") filed a complaint in United States
District Court for the District of Columbia (Civil Action No.
88-2803) naming the Issuer and its former President as
defendants. The complaint charged securities laws violations
arising from an alleged attempt to manipulate the price of the
Company's stock by conducting an allegedly false and misleading
publicity campaign during 1986 about a purported company product
known as the "Soberz" pill. The pill allegedly lowered a
person's blood-alcohol level rendering a drunk person sober. The
complaint also charged the defendants with violating securities
laws by failing to file timely and accurate periodic reports as
required. On October 19, 1989 the SEC obtained by default final
judgments of permanent injunction enjoining the defendants from
violating the securities laws by failing to file such reports, or
violating the anti-fraud provisions of the securities laws.
In October, 1990, after filing the Annual Report on Form 10-
K for the fiscal year ended December 31, 1989 (which report
included financial and other information covering the intervening
period since reports had last been filed), the Issuer made a
motion to have the injunction against itself set aside. By order
dated January 8, 1991 the U.S. District Court of the District of
Columbia denied the Issuer's motion without prejudice "pending
demonstration of Unioil's ability and willingness to comply with
filing requirements in the future over a reasonable period of
time." The Issuer intends to renew its motion to set aside the
judgment in the future after it has complied with the filing
requirements over a reasonable period of time. Management
believes that such motion will be granted at that time.
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The legal proceedings regarding the "Soberz" pill were filed
against the Issuer and its former President by the SEC in
response to certain meetings held with stockbrokers and others to
promote such pill, two press releases which made certain claims
regarding the pill, and a statement concerning the pill which was
included in the Issuer's Annual Report on Form 10-K for the year
ended December 31, 1985, which was filed on or about August 6,
1986. In addition to making the claims about such pill which
resulted in the SEC action, the statement in the Form 10-K report
indicated that the Issuer had agreed to acquire Guardian
Laboratories, Inc., the company which supposedly had rights to
the pill in the form of a patent pending. The statement further
indicated that the Issuer agreed to issue 500,000 shares of its
stock in consideration thereof. Successor management of the
Issuer has determined from the transfer records that such stock
was in fact issued, but can find no evidence that the Issuer ever
received anything in consideration of such issuance. The Board
of Directors has therefore decided to treat such stock as
cancellable for lack of consideration and has placed stop
transfer orders with the transfer agent to prevent any attempted
transfer of such stock. The Issuer also notified the recipient
of the action taken and instructed him to return the certificate
for cancellation. The Issuer received a response which disputed
the Issuer's position, but no further action has been taken by
either party in regard to the matter.
2. As part of the Corporation's First Amended Plan of
Reorganization approved by the U.S. Bankruptcy Court for the
District of Colorado in September, 1985, Joseph Associates, Inc.
("JAI") was granted a first mortgage and lien against all of the
assets of the Corporation except properties in Yuma County,
Colorado, to secure loans which eventually totalled more than $5
million. By letter dated May 15, 1990, JAI as the mortgagee
under the Mortgage, Security Agreement, Assignment and financing
statements securing those loans, notified the first purchasers of
oil and gas from the Corporation that they were to direct all
payments of proceeds attributable to the Corporation's interests
to JAI because the Corporation had failed to make payments on
those loans. Thereafter, such proceeds were paid to the order of
JAI.
By assignment dated July 1, 1990, JAI transferred all of its
right, title and interest in and to the Mortgage, Security
Agreement, Assignment and Financing Statement and the collateral
securing that Mortgage and the Promissory Note to Joseph
Associates of Greeley, Inc. ("JAGI"). All payments of oil and
gas proceeds which were previously sent to JAI have been and are
being sent to JAGI.
During 1993, JAGI commenced a foreclosure action against the
assets of the Company in Laramie County, Wyoming. This action
was commenced by JAGI in part to demonstrate its willingness and
ability to foreclose upon all the Issuer's assets and thereby
extinquish the claims of other creditors, as a means of inducing
such creditors to settle their claims on a reasonable basis or
have them extinquished. Management believes that such action
directly resulted in settlement during 1994 of all the remaining
judgments against the Issuer. The action was formally dismissed
without prejudice on February 10, 1995, as a result of a
settlement between the Company and the taxing authorities of
Laramie County, Wyoming resolving outstanding tax liens and
accrued interest in excess of $500,000.
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JAGI has, as of the date hereof, taken no further action to
foreclose on its Mortgage or to assert any rights under that
Mortgage. What has JAGI done as far as debt restructuring goes?
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security holders
through the solicitation of proxies or otherwise during the
fourth quarter of the fiscal year covered by this report. The
last meeting of stockholders of the Company was held in July,
1983.
PART II
Item 5. Market for Common Equity and Related Stockholder
Matters.
(a) Market information.
At the time of the Issuer's bankruptcy filing in August of
1984, the Issuer's common stock was traded in the
over-the-counter market, was quoted on NASDAQ and was also listed
on the Boston Stock Exchange. Following the bankruptcy filing,
trading activity gradually declined to the point where quotation
or listing of the stock was discontinued. During the past two
years, no systematic quotations of the Issuer's stock have been
available, to the best of present management's knowledge.
(b) Holders.
The approximate number of record holders of the Issuers
common stock as of March 6, 1997) is 2,112.
(c) Dividends.
The Issuer has not yet paid any cash dividends to date and
does not anticipate or contemplate paying dividends in the
foreseeable future. It is the present intention of management to
utilize all available funds for the development of the Issuer's
business. There are no restrictions that limit the ability to
pay dividends on common equity or that are likely to do so in the
future, other than the restrictions imposed by law. Under Nevada
corporate law, no dividends or other distributions may be made
which would render the Issuer insolvent or reduce assets to less
than the sum of its liabilities plus the amount needed to satisfy
outstanding liquidation preferences.
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity and Capital Resources. At December 31, 1996, the
Issuer was insolvent; liabilities greatly exceed assets, and
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revenues from operations were insufficient to discharge
liabilities or even pay interest accruing thereon. In such
financial condition, the Issuer cannot raise additional funds to
meet such commitments. The Issuer has been able to continue
operations only because Joseph Associates of Greeley, Inc.
("JAGI"), whose secured position has priority over all other
creditors of the Issuer, has been foregoing its right to
foreclose upon all the Issuer's assets, but is asserting its
right to take direct payment of the proceeds of production
attributable to the Issuer's interest in oil and gas properties.
The principal remaining indebtedness of the Company is the
secured debt owed to JAGI. With the interest that has been
accrued each year, this debt is now in excess of $13 million.
Management of the Company and JAGI intend to work out some
restructuring of this debt; however, at December 31, 1996 and as
of the date hereof, the debt has not been restructured and
remains on the books. There is no assurance the Company will be
able to work out an affordable restructuring of this debt. The
Company was able to fund settlements of its judgment liabilities
with a portion of the proceeds available to the Company from a
$350,000 loan plus an additional $350,000 line of credit it
obtained from a local bank in 1994. The Company used
approximately $287,500 of these proceeds to make cash payments in
settlement of outstanding judgment liabilities.
Results of Operations. Due to its bankruptcy and adverse
financial condition the Issuer had not engaged in drilling any
new wells or acquiring any additional properties since 1985.
Operations of the Issuer have been limited to continued operation
of wells previously drilled on properties already acquired. The
Issuer has continued to incur net losses due primarily to
interest expenses. After netting interest income and expense,
which includes an annual accrual of $679,096 of interest expense
on the secured debt owed to JAGI, the Company's net loss was
$(435,302) in 1996 compared to $(910,935) in 1995.
However, the Company's actual results from operations have
improved significantly during the last fiscal year compared to
the preceding fiscal year. The Company incurred an operating
loss of $(5,350) in 1996, down from an operating loss of
$(268,773) in 1995. This decrease resulted from an increase in
total revenues to $653,878 in 1996, which almost doubled compared
to total revenues of $364,788 generated in 1995. The increase is
primarily the result of one well in which the Company had a
working interest but did not participate in the development, and
was subject to a 200% payout provision before becoming entitled
to receive production payments with respect to its interest.
During 1996 it was dicovered that 200% payout had been reached
and that the Company had become entitled to significant revenues
with respect to its working interest. With the Company having
been able during 1996 to enter into two agreements providing for
drilling activity to resume with respect to the Company's
leasehold interests, management is hopeful the Company's results
of operations will continue to improve in 1997; however, there is
absolutely no assurance of this.
Item 7. Financial Statements and Supplemental Data.
See attached Financial Statements and Schedules.
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Item 8. Disagreements on Accounting and Financial Disclosure.
There are not and have not been any disagreements between
the Issuer and any of the accountants on any matter of accounting
principles or practices or financial statement disclosure.
PART III
Item 9. Directors and Executive Officers of the Issuer.
(a) Identification of Directors.
The current directors of the Issuer, who will serve until
the next annual meeting or until their successors are elected or
appointed and qualified, are set forth in the following table:
Term Served Positions
Name of Director Age As Director With Company
Charles E. Ayers, Jr. 52 July, 1990 Chairman & CEO
Fred C. Jones 59 May, 1991 Vice President/
Secretary & Director
Richard C. Zelnar 49 December, 1993 Director
(b) Identification of Executive Officers.
In addition to the officers who are also directors, Jamie R.
Hood, age 34, was appointed to the office of Treasurer in
January, 1995.
(c) Significant Employees.
None other than the persons previously identified.
(d) Family Relationships.
None.
(e) Business Experience.
(1) Background.
Charles E. Ayers, Jr. was admitted to the bar in 1974. He
attended Virginia Polytechnic Institute and State University and
Virginia Commonwealth University where he received a B.S. in
accounting in 1971. Mr. Ayers received his Juris Doctorate from
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the University of Richmond in 1974. He was counsel to the Senate
Finance and Rules Committees, 1974 Session, of the Virginia
Legislature, member of the Richmond and American Bar
Associations; Virginia State Bar and Federal Bar; Virginia Trial
Lawyers Association; and was an officer in the United States Army
from 1966 to 1969 serving one tour of duty in Vietnam. In 1982
he founded the law firm which is now known as Ayers & Stolte,
P.C.
Fred C. Jones is a graduate of Kemper College and has
attended both the University of Washington and Western Kentucky
University in courses related to business and management. Since
joining the company in January, 1985, he has been Administrative
Land Manager and since 1986, Operations Manager. Since the
election of the company's new Board of Directors in July, 1990,
he has been Vice President and Director of Operations and in May
1991, he was elected to serve as Secretary and on the Board of
Directors. From 1979 to 1984 he was an independent landman and
consultant for major and independent oil and gas, mining and
geothermal companies. From 1964 to 1978 he served in management
capacities for several wholesale, retail and marketing companies,
including four years as President and General Manager. From 1959
to 1964 he was District Manager of Husky Oil Company for
marketing and land management.
Richard C. Zelnar graduated with a B.A. Degree in 1973 from
Florida International University where he also completed one and
one half years of graduate work in Business Administration. He
is presently President and Chief Executive Officer of
Consolidated Aviation Services, Inc. and Consolidated Capital
Planning, Inc. From 1968 to 1976, he worked for Knight Ridder
Newspapers, Inc. in various staff management positions in
marketing and economic analysis. Mr. Zelnar has invested several
million dollar in oil and gas exploration and development
drilling operations in the Anadarko and Appalachian basins.
(2) Directorships.
None of the Issuer's directors nor any person nominated or
chosen to become a director holds any directorships in any other
company with a class of securities registered pursuant to Section
12 of the Exchange Act or subject to the requirements of Section
15(d) of such Act or any company registered as an investment
company under the Investment Company Act of 1940.
(f) Involvement in Certain Legal Proceedings.
As of the date of filing this report, no present officer or
director of the Issuer; 1) has had any petition filed, within the
past five years, in Federal Bankruptcy or state insolvency
proceedings on such person's behalf or on behalf of any entity of
which such person was an officer or general partner within two
years of filing; or 2) has been convicted in a criminal
proceeding within the past five years or is currently a named
subject of a pending criminal proceeding; or 3) has been the
subject, within the past five years, of any order, judgment,
decree or finding (not subsequently reversed, suspended or
vacated) of any court or regulatory authority involving violation
of securities or commodities laws, or barring, suspending,
enjoining or limiting any activity relating to securities,
commodities or other business practice.
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Compliance with Section 16(a) of the Exchange Act
The Issuer is not aware of any transactions in its
outstanding securities by or on behalf of any director, executive
officer or ten percent holder, which would require the filing of
any report pursuant to Section 16(a) during the fiscal year ended
December 31, 1996, that was not filed with the Issuer.
Item 10. Executive Compensation.
(a) Cash Compensation.
The Issuer's Chief Executive Officer is Charles E. Ayers,
Jr. Mr. Ayers has not been compensated for management or
director services to the Company to date. Mr. Ayers is an
attorney in the law firm of Ayers & Stolte, P.C., and this firm
acts as general counsel to the Issuer and bills for such services
at the firm's usual billing rates. The following table sets
forth the amounts paid as legal fees and costs to such law firm
for services rendered by Mr. Ayers firm during the fiscal years
ended December 31, 1996, 1995 and 1994. (See "Certain
Relationships and Related Transactions").
Year Total Cash Compensation
1996 $ 10,000
1995 $ 12,500
1994 $ 332
Of the Issuer's other officers or directors, only Fred Jones
and Jamie Hood were employed by the Issuer and received any
salary or wage for services rendered during 1996, 1995 and 1994.
None of these persons individually received annual compensation
in excess of $100,000 in any of these years.
There are presently no on-going plans or arrangements, such
as pension plans or deferred compensation plans, pursuant to
which compensation is paid or proposed to be paid in the future,
to any of the officers and directors of the Issuer, other than
standard, non discriminatory medical expense reimbursement plans
for employees.
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
(a) Security Ownership of Certain Beneficial Owners.
The following table sets forth the names, addresses and
security ownership of all persons known to the Issuer to be the
beneficial owner of more than 5% of the Issuer's voting stock.
12
<PAGE>
Name of Positions Amount and Nature Percent
Owner With of Ownership Owned
Company
Alvin Jarrett Estate Stockholder 666,667 shares 7.0%
4704 Ocean Front
Virginia Beach, VA
23451
Charles E. Ayers, Jr. Director 2,333,333 shares 24.7%
710 N. Hamilton St. & Stockholder
Richmond, VA 23230
The foregoing amounts reflect all shares each person would
be deemed a beneficial owner of, regardless of the form of
ownership. 666,667 of the shares shown for Mr. Ayers are owned
of record by immediate family members.
(b) Security Ownership of Management.
The following table indicates the stock ownership of the
Issuer's present directors as well as all present officers and
directors as a group:
Title of Amount and Nature of Percent
Name Class Beneficial Ownership of Class
Charles E. Ayers, Jr. Common 2,333,333 shares 24.7%
Fred C. Jones Common -0- shares 0%
Richard C. Zelnar Common -0- shares 0%
Jamie R. Hood Common -0- shares 0%
All officers and 2,333,333 shares 24.7%
directors as a group
(4 people)
Item 12. Certain Relationships and Related Transactions.
Except as disclosed in this item, in notes to the financial
statements or elsewhere in this report, the Issuer is not aware
of any indebtedness or other transaction in which the amount
involved exceeds $60,000 between the Issuer and any officer,
director, nominee for director, or 5% or greater beneficial owner
of the Issuer or an immediate family member of such person; nor
is the Issuer aware of any relationship in which a director or
13
<PAGE>
nominee for director of the Issuer was also an officer, director,
nominee for director, greater than 10% equity owner, partner, or
member of any firm or other entity which received from or paid
the Issuer, for property or services, amounts exceeding 5% of the
gross annual revenues or total assets of the Issuer or such other
firm or entity.
As previously mentioned, the Issuer's plan of reorganization
in bankruptcy was funded by a secured loan from Joseph
Associates, Inc. The secured interest has been assigned to
Joseph Associates of Greeley, Inc. These entities are affiliated
with the Issuer through common controlling ownership. During
1996, $579,096 of interest was accrued on this debt, bringing the
total accrued interest at December 31, 1996 to $8,096,242. It is
presently contemplated that this debt will be restructured, but
the terms of such restructuring have not been determined or
agreed to as of the date hereof.
Also as previously mentioned, the Issuer was able to settle
the remaining outstanding judgments against it during 1994 by
obtaining $700,000 in loans and lines of credit, and using the
cash available to it from such loans and lines of credit to make
settlement offers that included substantial payments of cash,
which the remaining judgment creditors accepted. The Issuer
obtained a $350,000 loan by pledging its Colorado properties to
secure such obligation. As part of that arrangement, JAGI agreed
to subordinate its secured interest in such properties. In order
to obtain the other $350,000 line of credit, the bank required
$350,000 in Certificates of Deposit as collateral, as well as the
personal guarantee of Charles E. Ayers, Jr. the current Chief
Executive Officer and Chairman of the Board of Directors of the
Issuer. These Certificates of Deposit funds were provided by an
affiliate, JAGI Capital Group, Inc. (the "Capital Group"), an
entity of which a member of management, Richard C. Zelnar, is an
owner. As part of these transactions, the Capital Group entered
into an agreement with the Company pursuant to which the Company
paid $35,000 to the Capital Group at closing, and will pay
interest in an amount equal to the difference between the yield
on the Certificates of Deposit and an 11% rate of return the
first year, and 14% the second year. Also, the Company agreed to
give the Capital Group a one quarter of one percent overriding
royalty interest in all wells it drills on undeveloped acreage,
and increase the interest to one half of one percent if the loan
is extended for a second year. In addition, the Company agreed
to pledge its Wyoming properties to secure this obligation. In
the event the Company defaulted under this agreement, the Capital
Group had the right to receive the income from the Wyoming
properties until the Certificates of Deposit are released by the
bank. During 1996, the Capital Group was paid off.
Mr. Ayers is a member of the law firm of Ayers & Stolte,
P.C. which now acts as general counsel for the Issuer. Mr.
Ayers' law firm has performed a variety of legal services on
behalf of and with respect to the Issuer. This firm has also
advanced substantial costs with respect to these legal matters
and has billed the Issuer at its regular rates for such fees and
costs. The Issuer paid this law firm legal fees during 1996 for
such services in the amount of $10,000.
14
<PAGE>
PART IV
Item 13. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a) The following documents are filed as part of this
report:
1. Financial Statements examined and reported upon by
Pritchett, Siler & Hardy, Independent Certified Public
Accountants, containing a Balance Sheet at December 31, 1996 and
Statements of Operations, Shareholders' Equity (Deficit) and Cash
flows for the two fiscal years ended December 31, 1996.
2. Financial Statement Schedules
(See index to Financial Statements)
3. Exhibits. None
(b) No reports on Form 8-K have been filed during the last
quarter of the fiscal year ended December 31, 1996.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Issuer has duly caused this
registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNIOIL
Date: April 10, 1997 /s/ Charles E. Ayers, Jr.
Charles E. Ayers, Jr., Chairman
(Chief Executive Officer)
Date: April 8, 1997 /s/ Fred C. Jones
Fred C. Jones, Vice President/Secretary
(Chief Financial Officer)
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Issuer and in the capacities and on the
dates indicated.
Date: April 10, 1997 /s/ Charles E. Ayers, Jr.
Charles E. Ayers, Jr., Director
Date: April 8, 1997 /s/ Fred C. Jones
Fred C. Jones, Director
<PAGE>
UNIOIL
FINANCIAL STATEMENTS
DECEMBER 31, 1996
PRITCHETT, SILER & HARDY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
UNIOIL
CONTENTS
PAGE
_ Independent Auditors' Report 1
_ Balance Sheet, December 31, 1996 2 - 3
_ Statements of Operations, for the years ended
December 31, 1996 and 1995 4
_ Statement of Stockholders' Deficit, from
December 31, 1993 through December 31,
1996 5
_ Statements of Cash Flows, for the years ended
December 31, 1996 and 1995 6 - 7
_ Notes to Financial Statements 8 - 14
_ Supplemental Information - Unaudited 15 - 20
<PAGE>
PRITCHETT, SILER & HARDY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
430 EAST 400 SOUTH
SALT LAKE CITY, UTAH 84111
INDEPENDENT AUDITORS' REPORT
Board of Directors
UNIOIL
Evans, Colorado
We have audited the accompanying balance sheet of Unioil at
December 31, 1996 and the related statements of operations,
stockholders' deficit and cash flows for the years ended December
31, 1996 and 1995. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements audited by us present
fairly, in all material respects, the financial position of
Unioil as of December 31, 1996 and the results of its operations
and its cash flows for the years ended December 31, 1996 and
1995, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in
Note 9 to the financial statements, the Company has suffered
losses from operations, has a net capital deficiency, has
unresolved contingencies and has uncertainties related to the
realization of assets, raising substantial doubt about its
ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 9. The
financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
/s/PRITCHETT, SILER & HARDY, P.C.
March 12, 1997
<PAGE>
UNIOIL
BALANCE SHEET
ASSETS
December 31,
1996
____________
CURRENT ASSETS:
Cash $ 118,886
Joint interest and trade accounts receivable,
net of allowance for doubtful accounts of
$226,233 at 1996 124,480
Deferred loan costs, net -
Other current assets 3,562
____________
Total Current Assets 246,928
PROPERTY AND EQUIPMENT, net 3,136
INVESTMENT IN OIL AND GAS PRODUCING
PROPERTIES, full cost method, net of depletion 3,730,253
OTHER ASSETS 2,152
____________
TOTAL ASSETS $3,982,469
____________
The accompanying notes are an integral part of this financial statement.
-2-
<PAGE>
UNIOIL
BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' DEFICIT
December 31,
1996
____________
CURRENT LIABILITIES:
Accounts payable $ 103,271
Joint interest accounts payable 5,317
Line of credit 350,000
Notes payable - related party 5,791,000
Interest payable - related parties 8,096,242
Other current liabilities 197,412
____________
Total Current Liabilities 14,543,242
CONTINGENCIES [See Notes 7 and 8] -
____________
Total Liabilities 14,543,242
____________
STOCKHOLDERS' DEFICIT:
Common stock, $.01 par value,
100,000,000 shares authorized,
9,441,657 shares issued and
outstanding at 1996 94,417
Capital in excess of par value 4,062,519
Retained deficit (14,717,709)
____________
Total Stockholders' Deficit (10,560,773)
____________
TOTAL LIABILITIES AND STOCK-
HOLDERS' DEFICIT $3,982,469
____________
The accompanying notes are an integral part of this financial statement.
-3-
<PAGE>
UNIOIL
STATEMENTS OF OPERATIONS
For The Years Ended
December 31
________________________
1996 1995
______________________
REVENUE:
Oil and gas sales $621,174 $311,197
Income from serving as operator 32,704 53,591
______________________
Total Revenue 653,878 364,788
______________________
EXPENSES:
Production costs and related taxes 271,304 203,392
General and administrative 208,302 280,273
Depreciation, depletion and amortization 179,622 149,896
______________________
Total Expenses 659,228 633,561
______________________
OPERATING (LOSS) (5,350) (268,773)
______________________
OTHER INCOME (EXPENSE):
Interest income and other 217,490 3,036
Interest expense - related party (579,096) (607,480)
Interest expense - other (70,846) (37,491)
Gain on disposal of asset 2,500 -
______________________
(429,952) (641,935)
______________________
LOSS FROM OPERATIONS BEFORE INCOME
TAXES AND EXTRAORDINARY ITEMS (435,302) (910,708)
CURRENT TAX EXPENSE - -
DEFERRED TAX EXPENSE - -
______________________
LOSS FROM OPERATIONS BEFORE
EXTRAORDINARY ITEMS: (435,302) (910,708)
EXTRAORDINARY ITEMS:
Gain on discharge of debt obligations
(No tax effect) 10,972 -
______________________
NET INCOME (LOSS) $(424,330)$(910,708)
______________________
INCOME (LOSS) PER SHARE:
Loss before extraordinary item $ (.05)$ (.10)
Extraordinary items - -
______________________
Net Income (Loss) $ (.00) $ (.10)
______________________
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
UNIOIL
STATEMENT OF STOCKHOLDERS' DEFICIT
FROM DECEMBER 31, 1993 THROUGH
DECEMBER 31, 1996
Common Stock Capital in
___________________ Excess of Retained
Shares Amount Par Value Deficit Total
_______________________________________________________
BALANCE, December 31,
1993 9,441,657 94,417 4,062,519 (13,865,411) (9,708,475)
Net income for the
year ended
December 31, 1994 - - - 482,740 482,740
_______________________________________________________
BALANCE, December 31,
1994 9,441,657 94,417 4,062,519 (13,382,671) (9,225,735)
Net loss for the
year ended
December 31, 1995 - - - (910,708) (910,708)
_______________________________________________________
BALANCE, December 31,
1995 9,441,657 94,417 4,062,519 (14,293,379) (10,136,443)
Net loss for the
year ended
December 31, 1996 - - - (424,330) (424,330)
_______________________________________________________
BALANCE, December 31,
1996 9,441,657 $94,417 $4,062,519$(14,717,709)$(10,560,773)
_______________________________________________________
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
UNIOIL
STATEMENTS OF CASH FLOWS
Net Increase (Decrease) in Cash
For The Years Ended
December 31
________________________
1996 1995
___________ ___________
Cash Flows From Operating Activities:
Net income (loss) $(424,330) $ (910,708)
___________ ___________
Adjustments to reconcile net income
(loss) to net cash used in operating
activities:
(Gain) loss on disposal of property - -
Gain on discharge of debt (2,500) -
Depreciation, depletion and
amortization (6,908) 100,346
Deferred loan costs amortization 49,550 49,550
Bad debt expense 11,408 14,067
Changes in assets and liabilities:
(Increase) decrease in joint interest
and trade receivables (45,500) 6,546
(Increase) decrease in other current
assets 1,065 755
Increase (decrease) in accounts
payable (6,791) (3,393)
Increase (decrease) in joint interest
accounts payable (8,994) (12,910)
Increase in interest payable 576,646 581,546
Increase (decrease) in other current
liabilities 1,105 (6,129)
Increase (decrease) in judgments
payable - -
__________ ____________
Total Adjustments 569,081 730,378
__________ ____________
Net Cash Provided(Used) by Operating
Activities 144,751 (180,330)
__________ ____________
Cash Flows From Investing Activities:
Purchase of property and equipment (3,360) -
Disposition of property and equipment 7,675 -
Proceeds from sale of property and
equipment 2,500 -
Additions to oil and gas full cost pool - -
Dispositions of oil and gas property 128,985 -
__________ ____________
Net Cash Provided by Investing
Activities 135,800 -
__________ ____________
Cash Flows From Financing Activities:
Proceeds from line of credit 126,700 169,337
Payments for notes payable (350,000) -
Proceeds from notes payable - -
__________ ____________
Net Cash Provided by Financing
Activities (223,300) 169,337
__________ ____________
[Continued]
-6-
<PAGE>
UNIOIL
STATEMENTS OF CASH FLOWS [Continued]
Net Increase (Decrease) in Cash
For The Year Ended
December 31
________________________
1996 1995
____________ __________
Net Increase (Decrease) in Cash 57,251 (10,993)
Cash at Beginning of Year 61,635 72,628
____________ __________
Cash at End of Year $118,886 $61,635
____________ __________
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period:
Interest $79,660 $61,494
____________ __________
Income taxes $ - $ -
____________ __________
Supplemental Schedule of Noncash Investing and Financing
Activities:
For the Year Ended December 31, 1996:
None
For the Year Ended December 31, 1995:
The Company increased its investment in oil and gas property
in the amount of 59,915 in exchange for payment of joint
interest receivables in the same amount.
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE>
UNIOIL
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - The Company is engaged in oil and gas
exploration, development and production activities on its own
behalf and as an operator for others. The Company is
incorporated under the laws of the State of Nevada. The
Company completed a sale of its common stock to the public in
December, 1981. During 1984, the Company filed a petition for
reorganization under Chapter 11 of the Bankruptcy Code. In
connection with the reorganization process, control of the
Company changed hands and new management was installed during
1985. The Company emerged from the reorganization during
1989. During 1990, control of the Company and management
changed again.
Property and Equipment - Property and equipment are recorded
at cost which is depreciated over the estimated useful lives
of the related assets. Depreciation is computed using the
straight-line method for financial reporting purposes and with
accelerated methods for income tax purposes. The useful lives
of property and equipment for purposes of financial reporting
range from four to ten years.
Oil and Gas Properties - Oil and gas properties are accounted
for on the full cost method, whereby all costs associated with
acquisition, exploration and development of oil and gas
properties are capitalized on a country-by-country, cost
center basis. All oil and gas revenues are derived from
reserves located in northern Colorado and southern Wyoming.
Amortization of such costs is determined by the ratio of
current period production to estimated proved reserves.
Estimated proved reserves are based upon reports of petroleum
engineers.
The net carrying value of oil and gas properties is limited to
the lower of amortized costs or the cost center ceiling
defined as the sum of the present value [10% discount rate] of
estimated, unescalated future net cash flows from proved
reserves, plus the lower of cost or estimated fair value of
unproved properties, giving effect to income taxes.
Depletion, as a percentage of gross oil and gas revenues, was
20.82% and 31.78% for the years ended December 31, 1996 and
1995, respectively.
Income (Loss) Per Share - The computation of income (loss) per
share of common stock is based on the weighted average number
of shares outstanding during the period presented.
Cash Flow Statement - For purposes of the statements of cash
flows, the Company considers all highly liquid debt
investments purchased with a maturity of three months or less
to be cash equivalents.
Income Taxes - The Company accounts for income taxes in
accordance with Statement of Financial Accounting Standards
No. 109 "Accounting for Income Taxes" which requires the
liability approach for the effect of income taxes.
Deferred Loan Costs - Expenses in the amount of $108,109
associated with obtaining a line of credit and a note payable
were incurred during 1994. These costs were deferred and have
now been fully amortized using the straight-line method over
the life of the loans. [See Note 5]
-8-
<PAGE>
UNIOIL
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - PROPERTY AND EQUIPMENT
The following is a summary of property and equipment - at
cost, less accumulated depreciation as of December 31:
1996
___________
Shop tools and equipment $21,112
Furniture and fixtures 23,244
Transportation equipment 4,003
Leasehold improvements 5,165
___________
53,524
Less: accumulated depreciation (50,388)
___________
Total $ 3,136
___________
All property and equipment of the Company is collateral for
the related party note payable to Joseph Associates of
Greeley, Inc. [See Note 7].
Depreciation expense for the years ended December 31, 1996 and
1995 amounted to $768 and $1,461, respectively.
NOTE 3 - LINE OF CREDIT
During November of 1994, the Company obtained a $350,000 line
of credit from a bank. As of December 31, 1996 the Company
had total borrowings of $350,000 against the line of credit,
which is currently bearing interest at 9.50%, maturing in
November of 1997 and is colateralized by a first lien on the
Company's Colorado oil and gas properties.
NOTE 4 - NOTES PAYABLE - RELATED PARTY
The following is a summary of notes payable as of December 31
to related parties:
1996
____________
Note payable to related corporation,
currently in default, interest accruing
at 19% per annum through December, 1991,
10% thereafter, secured by substantially
all the Company's assets, including
interests in oil and gas wells
[See Note 7]. $5,791,000
____________
-9-
<PAGE>
UNIOIL
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - NOTES PAYABLE
During November 1996 the Company paid in full along with
interest a note payable to a bank. The note payable amounted
to $350,000 and was collateralized by a CD in the amount of
$350,000 held in the name of JAGI Capital Group, Inc., a
related party, the personal guarantee of an officer, director
and shareholder of the Company and by a second lien on all of
the Company's Colorado oil and gas properties and a first lien
on the Wyoming oil and gas properties. Interest was also
being paid to the JAGI Capital Group at 8.13%, the difference
between 14% and the current yield on the CD's. The balance on
the note for December 31, 1995 was $350,000.
The Company deferred the expense of $108,109 in costs
assiciated with the obtaining of this note payable and a
related line of credit. Amortization expense for the deferred
loan costs was $49,550 and $49,550 in 1996 and 1995,
respectively.
NOTE 6 - INCOME TAXES
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109 Accounting
for Income Taxes [FASB 109]. FASB 109 requires the Company to
provide a net deferred tax asset or liability equal to the
expected future tax benefit or expense of temporary reporting
differences between book and tax accounting and any available
operating loss or tax credit carryforwards. At December 31,
1996 and 1995, the total of all deferred tax assets was
$6,354,609 and $6,237,130 and the total of the deferred tax
liabilities was $1,315,306 and $1,356,299. The amount of and
ultimate realization of the benefits from the deferred tax
assets for income tax purposes is dependent, in part, upon
the tax laws in effect, the Company's future earnings, and
other future events, the effects of which cannot be
determined. Because of the uncertainty surrounding the
realization of the deferred tax assets, the Company has
established a valuation allowance of $5,039,303 and $4,880,831
as of December 31, 1996 and 1995, which has been offset
against the deferred tax assets. The net change in the
valuation allowance during the year ended December 31, 1996,
was $158,472.
The Company has available at December 31, 1996, unused tax
operating loss carryforwards of approximately $16,100,000,
which may be applied against future taxable income and expire
in various years beginning in 1999 through 2010.
-10-
<PAGE>
UNIOIL
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - INCOME TAXES [Continued]
The components of income tax expense from continuing
operations for the years ended December 31, 1996 and 1995
consist of the following:
Year Ended December 31,
_________________________
1996 1995
__________ __________
Current income tax expense:
Federal $ - $ -
State - -
__________ __________
Net current tax expense - -
__________ __________
Deferred tax expense (benefit) arising from:
Excess of tax over financial accounting
depreciation $ 775 $(7,397)
Excess of tax over financial accounting
depletion (41,767) (27,587)
Contribution carryover (99) (188)
Reserve for bad debts (4,296) (80,259)
Net operating loss carryforwards (113,084) (631,711)
Valuation allowance 158,471 747,142
__________ __________
Net deferred tax expense $ - $ -
__________ __________
Deferred income tax expense results primarily from the
reversal of temporary timing differences between tax and
financial statement income. There is no portion of current or
deferred tax expense that is required to be allocated to the
extraordinary item.
A reconciliation of income tax expense at the federal
statutory rate to income tax expense at the Company's
effective rate is as follows:
Year Ended December 31,
_________________________
1996 1995
__________ __________
Computed tax at the expected federal
statutory rate 34.00% 34.00%
Excess of tax over financial accounting
depreciation 1.30 (.37)
Excess of tax over financial accounting
depletion (1.03) (1.38)
Contribution carryover - (.01)
Reserve for bad debt - (4.01)
Non deductible entertainment (.28) -
State income taxes, net of federal income
tax benefits 3.36 3.36
Net operation loss carry forward (37.35) (31.59)
__________ __________
Effective income tax rates 0.00% 0.00%
__________ __________
-11-
<PAGE>
UNIOIL
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - INCOME TAXES [Continued]
The temporary differences gave rise to the following deferred
tax asset (liability) at December 31, 1996 and 1995:
Year Ended December 31,
_____________________________
1996 1995
_____________ ____________
Excess of tax over book
accounting depreciation $(198,887) $(198,113)
Excess of tax over book
accounting depletion (1,116,419) (1,158,186)
Contribution carryforward 299 200
Reserve for bad debt 84,555 80,259
Capital loss carryover 154,073 154,073
NOL carryforwards 6,023,627 5,910,543
The deferred taxes are reflected in the consolidated balance
sheet as follows:
Year Ended December 31,
_____________________________
1996 1995
____________ ____________
Short term asset (liability) $ - $ -
Long term asset (liability) $ - $ -
NOTE 7 - RELATED PARTY TRANSACTIONS
The Company has agreed to indemnify its officers and directors
against liability to the extent permissible by law.
The Company serves as operator for various wells and, in that
capacity, receives the sales proceeds from oil and gas
purchasers, and pays the underlying production expenses on
behalf of all well interest owners. The Company has also
served as operator on occasional drilling projects wherein it
advanced or collected monies for the drilling of wells.
Pursuant to these receiving and paying activities, at any one
time the Company may owe money to, or have receivables from,
the various joint interest owners. In the past, joint
interest owners have included partnerships and private
companies that were affiliated by virtue of their common
control through a former officer of the Company.
An officer and director of the Company is affiliated with a
law firm which provides legal representation, consultation and
other services to the Company. During 1996, $10,000 in fees
and $0 in out of pocket costs were incurred by the Company to
this law firm. During 1995, $12,500 in fees and $0 in out of
pocket costs were incurred by the Company to this law firm.
-12-
<PAGE>
UNIOIL
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - RELATED PARTY TRANSACTIONS [Continued]
During 1985, the Company borrowed approximately $6,000,000
from Joseph Associates, Inc. [JA] in order to fund the
reorganization plan approved by the bankruptcy court. Under
the loan agreement, initial interest of $156,889 and an
origination fee of $150,000 were paid to JA. The loan is
secured by basically all of the assets of the Company,
including interests in oil and gas wells. The loan bears
interest at the greater of (1) 19% per annum or (2) 6% over
the prime rate of 90-day commercial loans as published by
Irving Trust Company of New York (subject to the maximum rate
of interest allowed by law). The original term of the loan
was for 60 months with the principal and interest payments due
the first day of each month beginning October 1, 1985. Almost
from the beginning, the Company has been in default with
respect to payments due on this loan. In May, 1989, JA
exercised its right under the loan agreement to receive
directly from purchasers all proceeds derived from the sale of
oil and gas by the Company. Accordingly, since December 31,
1989, all monies received from oil and gas purchasers is
deposited into a checking account controlled by JA and
transferred as needed to accounts owned by the Company to
cover operating expenditures. The same procedure is still in
effect at December 31, 1995 except that the rights of JA have
transferred from a former officer of the Company to interests
held by certain current officers, directors and shareholders.
Also, interest is being accrued by the Company at the rate(s)
specified above through December, 1991 and at 10% per annum
thereafter. Accrued interest payable on the loan amounts to
$8,096,242 at December 31, 1996. Interest expense on the loan
was $579,096 and $579,096 for each of the years ended December
31, 1996 and 1996. No Interest was paid to JA for the years
ended December 31, 1996 and 1995. Interest continues to be
accrued on the note, but note holders have indicated that they
will not pursue collection of the note in the near future and
may be willing to consider some restructuring of the debt in
an attempt to improve the financial condition of the Company
[See Note 8].
During the periods from 1986 through 1989, JA paid certain
expenses on behalf of the Company, and the Company paid
certain expenses on behalf of JA. These expenditures have
been recorded by the Company in a non-interest bearing,
related-party, account payable account, except for a few
payments which were treated as a reduction of accrued
interest. The account payable to JA amounted to $156,266 at
December 31, 1996 and is included in other current
liabilities. The amounts are non-interest bearing.
NOTE 8 - CONTINGENCIES AND LITIGATION
SEC Complaint - On September 28, 1988, the United States
Securities and Exchange Commission [SEC] filed a complaint
against the Company and its former president for allegedly
manipulating its common stock price and for misleading
promotions with regards to a proposed product. The Company
was also charged with failure to file required SEC reports.
Final judgments and a permanent injunction were entered
against the Company on October 19, 1989. The Company filed a
motion to set aside the judgment which was denied with
permission to renew the motion upon substantial compliance.
Management believes that the judgment will ultimately be
dismissed as they demonstrate their ability to file currently
required SEC filings.
-13-
<PAGE>
UNIOIL
NOTES TO FINANCIAL STATEMENTS
NOTE 9 - GOING CONCERN
The Company has incurred significant losses during the past
several years, has current liabilities in excess of current
assets of $14,296,314 at December 31, 1996, and has a net
stockholders' deficit of $10,560,773 at December 31, 1996.
These items raise substantial doubt about the ability of the
Company to continue as a going concern.
Management's plans in regards to these matters are as follows:
Management is currently negotiating the possible
conversion of all or part of $5,791,000 of notes
payable and related accrued interest of approximately
$8,096,242 to stockholders equity in exchange for the
issuance of common stock.
Management has been making plans for and hopes to
attract new venture capital through outside investors
and/or a supplemental stock offering, to start an oil
and gas drilling program in the near future.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern.
The financial statements do not include any adjustments
relating to the recoverability and classification of recorded
asset amounts or the amounts and classification of liabilities
that might be necessary should the Company be unable to obtain
additional financing, establish profitable operations or
realize its plans.
NOTE 10 - EXTRA ORDINARY AND UNUSUAL ITEMS
Extraordinary Item - During 1996 the Company obtained a
forgiveness of debt from a vendor in the amount of $10,972.
Unusual Items - The Company has been an interest owner in a
well which was operated by another party. The Company had
agreed not to participate in the development of the well and
was consequently not receiving any payout, due to the results
of an audit initiated by the Company. The Company determined
the payout on the well had resulted earlier than first
indicated by the operator and the Company received a
settlement of $177,858 which has been recorded on the
statement of operations under the caption "Interest income and
other".
-14-
<PAGE>
UNIOIL
SUPPLEMENTAL INFORMATION
[Unaudited]
OIL AND GAS PRODUCING ACTIVITIES
Oil and Gas Reserves - Users of this information should be aware
that the process of estimating oil and gas reserves is very
complex, requiring significant subjective decisions in the
evaluation of available geological, engineering, and economic
data for each reservoir. The data for a given reservoir may
change substantially over time as a result of, among other
things, additional development activity, production history and
viability of production under varying economic conditions;
consequently, material revisions to existing reserve estimates
may occur in the future. Although every reasonable effort is
made to ensure that the reserve estimates reported represent the
most accurate assessment possible, the significance of the
subjective decisions required, and variances in available data
for various reservoirs make these estimates generally less
precise than other estimates presented in connection with
financial statement disclosure.
Proved reserves are estimated quantities of natural gas, crude
oil and condensate, and natural gas liquids which geological and
engineering data demonstrate, with reasonable certainty, to be
recoverable in future years from known reservoirs under existing
economic and operating conditions.
Proved developed reserves are proved reserves that can be
expected to be recovered through existing wells with existing
equipment and operating methods.
The following tables set forth the Company's net reserves and the
changes in the net proved reserves, all of which are located
within the United States, as estimated by management and
independent petroleum engineers, Resource Services International,
Inc. The Company does not have proved reserves applicable to
long-term supply agreements with foreign governments.
-15-
<PAGE>
UNIOIL
SUPPLEMENTAL INFORMATION
[Unaudited]
OIL AND GAS PRODUCING ACTIVITIES [Continued]
Changes in Net Proved Reserves
1996 1995
_______________________________
Oil Gas Oil Gas
(MBBLS) (MMCF) (MBBLS) (MMCF)
_______ ______ ________ _______
Estimated quantity at
beginning of period 2,217 28,466 2,227 28,542
Revisions of previous estimates (363) (1,934) 6 (40)
Discoveries and extensions - - - -
Purchase of reserves in place - - - -
Production (18) (46) (16) (36)
Sale/disposal of reserves in place - - - -
_______ ________ _________ _______
Estimated quantity at end of
period 1,836 26,486 2,217 28,466
_______ ________ _________ _______
Proved developed reserves:
Beginning of period 90 483 211 1,338
End of period 147 523 90 483
_______ _________ _________ _______
Company's proportional interest
in reserves of investees
accounted for by the equity
method - end of year - - - -
_______ _________ _________ _______
-16-
<PAGE>
UNIOIL
SUPPLEMENTAL INFORMATION
[Unaudited]
OIL AND GAS PRODUCING ACTIVITIES [Continued]
Costs Incurred in Oil and Gas Property Acquisition,
Exploration and Development Activities
December 31,
____________________
1996 1995
_________ ________
[In Thousands of Dollars]
Acquisition of properties:
Undevelopment leases $ - $ 46
Proved producing leases - 12
Exploration costs - -
Development costs - -
________ ________
Total Additions to Oil and Gas
Properties $ - $ 58
________ ________
Company's share of equity method
investees' costs of property
acquisition, exploration and
development costs $ - $ -
________ ________
Capitalized Costs Relating to Oil and Gas Producing Activities
Capitalized costs as of the end of the
period: [In thousands of dollars]
Proved properties $ 9,152 $ 9,152
Unproved properties 294 294
________ ________
Total Capitalized Costs 9,446 9,446
Less accumulated depreciation and
depletion (5,716) (5,587)
________ ________
Net Capitalized Costs $ 3,730 $ 3,859
________ ________
Company's share of equity method
investees' net capitalized costs $ - $ -
________ ________
-17-
<PAGE>
UNIOIL
SUPPLEMENTAL INFORMATION
[Unaudited]
OIL AND GAS PRODUCING ACTIVITIES [Continued]
Results of Operations for Producing Activities
December 31,
___________________
1996 1995
________ ________
[In Thousands of Dollars]
Oil and gas sales $ 621 $ 311
Production costs (271) (203)
Exploration costs - -
Depreciation and depletion (7) (99)
________ ________
Income (loss) from operations 343 9
Income tax benefit (expense) (117) (3)
________ ________
Results of Operations from Producing
Activities [Excluding Corporate
Overhead and Interest Costs] 226 6
________ ________
Company's share of equity method
investees' results of operations
for producing activities - -
________ ________
Standard Measure of Discounted Future Net Cash Flows
Relating to Proved Oil and Gas Reserves
The information that follows has been developed pursuant to
procedures prescribed by SFAS No. 69, and utilizes reserve and
production data estimated by management and independent petroleum
engineers. The information may be useful for certain comparison
purposes, but should not be solely relied upon in evaluating the
Company or its performance. Moreover, the projections should not
be construed as realistic estimates of future cash flows, nor
should the standardized measure be viewed as representing current
value.
The future cash flows are based on sales, prices, costs, and
statutory income tax rates in existence at the dates of the
projections. Material revisions to reserve estimates may occur in
the future, development and production of the oil and gas reserves
may not occur in the periods assumed, and actual prices realized
and actual costs incurred are expected to vary significantly from
those used. Management does not rely upon the information that
follows in making investment and operating decisions; rather,
those decisions are based upon a wide range of factors, including
estimates of probable reserves as well as proved reserves, and
different price and cost assumptions than those reflected herein.
-18-
<PAGE>
UNIOIL
SUPPLEMENTAL INFORMATION
[Unaudited]
OIL AND GAS PRODUCING ACTIVITIES [Continued]
Standard Measure of Discounted Future Net Cash Flows
Relating to Proved Oil and Gas Reserves
The following tables set forth the standardized measure of
discounted future net cash flows from projected production of the
Company's proved oil and gas reserves:
December 31,
____________________
1996 1995
_________ ________
[In Thousands of Dollars]
Future reserves $135,335 $84,564
Future production and development
costs (76,322) (58,604)
Future income tax expenses (19,993) (8,762)
________ ________
Future net cash flows 39,020 17,198
Discount to present value at 10 percent (22,460) (11,132)
________ ________
Standardized measure of discounted
future net cash flows $16,560 $ 6,066
________ ________
Company's share of equity method
investees' standardized measure of
discounted future net cash flows $ - $ -
________ ________
-19-
<PAGE>
UNIOIL
SUPPLEMENTAL INFORMATION
[Unaudited]
OIL AND GAS PRODUCING ACTIVITIES [Continued]
Standard Measure of Discounted Future Net Cash Flows
Relating to Proved Oil and Gas Reserves
The following table sets forth the changes in standardized
measure of discounted future net cash flows:
December 31,
____________________
1996 1995
_________ ________
[In Thousands of Dollars]
Balance at beginning of period $ 6,066 $ 7,033
Sales of oil and gas net of production
costs (350) (108)
Revisions to reserves proved in prior
years:
Changes in prices and costs 74,662 (8,501)
Changes in quantity estimates and
timing of production (75,049) 7,661
Additions to proved reserves:
Acquisition of reserves in place - -
Current year discoveries, extensions
and improved recoveries - -
Estimated future development and
production costs related to current
year acquisitions, discoveries,
extensions and improved recoveries - -
Net change in income taxes 11,231 (19)
Sales of reserves in place - -
Accretion of discount - -
Other - change in ten percent
discount - -
________ ________
Balance at End of Period $16,560 $ 6,066
________ ________
-20-
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 119
<SECURITIES> 0
<RECEIVABLES> 124
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 247
<PP&E> 53
<DEPRECIATION> 50
<TOTAL-ASSETS> 3,982
<CURRENT-LIABILITIES> 14,543
<BONDS> 0
0
0
<COMMON> 94
<OTHER-SE> (10,655)
<TOTAL-LIABILITY-AND-EQUITY> 3,982
<SALES> 621
<TOTAL-REVENUES> 654
<CGS> 271
<TOTAL-COSTS> 271
<OTHER-EXPENSES> 388
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 650
<INCOME-PRETAX> (435)
<INCOME-TAX> 0
<INCOME-CONTINUING> (435)
<DISCONTINUED> 0
<EXTRAORDINARY> 11
<CHANGES> 0
<NET-INCOME> (424)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> 0
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